Cellcom cites increased competition as revenues decline 6.7% in 3Q14

12 Nov 2014

Israel’s Cellcom saw total turnover decline by 6.7% in the three months ended 30 September 2014, with it again citing the impact of the ongoing erosion of prices and increased competition in the retail mobile market as a key factor.

In the operator’s third fiscal quarter of 2014 it recorded total revenues of ILS1.142 billion (USD299.6 million), down from ILS1.224 million in the corresponding period a year earlier, while service revenues totalled ILS880 million, representing a 13.1% drop against Q3 2013. By comparison, Cellcom saw an increase in equipment revenues, which rose to ILS250 million, mainly due it selling 24% more smartphones in 3Q14 against the year-ago period, though also as a result of a higher average sale price for handsets. Operating income in the quarter under review stood at ILS190 million, up 9.8% year-on-year, though this included the one-time reduction of a provision for cell-sites rent expenses in the amount of ILS44 million. Earnings before interest, tax, depreciation and amortisation (EBITDA) for the third quarter of 2014 was relatively stable, falling by just 0.3% to ILS346 million, while net income totalled ILS106 million, compared to ILS52 million in the corresponding period of 2013, with that increase said to be the result of reduced operating expenses, mainly due to efficiency measures implemented by the operator.

As at end-September 2014 Cellcom had a cellular subscriber base of 3.010 million, having declined by around 19,000 in the three months to that date, with the cellular churn rate for Q3 2014 standing at 11.0%, up from 8.9% in the same period a year earlier. Monthly average revenue per user (ARPU) meanwhile was ILS70.6 in the period under review, compared to ILS79.6 in 3Q13, with the decline said to have resulted mainly from the ongoing erosion in the price of cellular services and lower revenues from hosting operators on the Cellcom network.

Nir Sztern, Cellcom’s chief executive officer, said of the company’s quarterly performance: ‘We are pleased with the results of our focus on equipment sales, which led to an increase of these revenues in the third quarter, compared with both the previous quarter and the third quarter of last year, as well as the results of the efficiency measures we implemented. On the other hand, the aggressive price competition, mainly in the cellular arena, continues, the effects of which are reflected in the decrease in EBITDA excluding a one-time effect, and the continued erosion in service revenues, which is expected to continue in the coming quarters as well.’

Israel, Cellcom